In the 2005 international bestseller The World is Flat: A Brief History of the Twenty-First Century, author Thomas Friedman’s main message, at least as I see it, is that fewer boundaries exist between countries, rendering historical and geographical divisions increasingly irrelevant.

In essence, Friedman’s influential book suggests that the world is a much smaller place than it was just a decade or two ago. The Internet and other advanced telecommunications technologies have conspired to make markets both foreign and domestic more and more fluid. The flow of data today knows no boundaries between nation states.

Yet, while most of the world marches toward this era of no boundaries, the American court system is heading in the opposite direction.

In a June ruling by the U.S. Supreme Court – Morrison v. National Australia Bank Ltd. – the court decided that Australian shareholders who bought shares overseas in an Australian bank couldn’t file securities fraud claims in an American court. Essentially, the ruling gives foreign companies diplomatic immunity when it comes to charges of securities fraud.

While we respect the Supreme Court’s collective legal wisdom and experience, the ruling has left us here at Hagens Berman scratching our heads. My colleague, Reed Kathrein, delved into the legal principles and precedents involved in the Morrison decision in an earlier blog post. However, a Sept. 28th report in the Wall Street Journal brings a fresh perspective to an extremely vital issue for investors by examining how the Morrison decision could affect two current cases involving foreign companies – Toyota Motor Corp. and BP PLC, or British Petroleum.

According to the WSJ story, the Supreme Court concluded that in order to avoid “incompatibility with the applicable laws of other countries,” U.S. securities laws should govern domestic stock purchases only.

Frankly, given today’s global economy, the Supreme Court’s interpretation of the law strikes us as decidedly narrow. Heck, anyone with a computer, an Internet connection and an E-Trade account today can buy shares in a foreign company. It’s not that hard. In fact, it’s commonplace.

It’s not fair to deny American investors – whether private individuals or large institutional investors with billions at stake – the protections offered by the U.S. court system simply because they bought their shares on a foreign stock exchange.

Corporations – both foreign and domestic – already have enough power. It’s hard enough to hold a major international conglomerate accountable when matters go awry. Yet, this ruling helps large businesses avoid accountability at a time when investors have suffered massive financial losses in the market.

Two cases in point: Toyota and BP.

In the Toyota case, a major public pension fund in Pennsylvania alleges that it suffered about $35 million in shareholder losses related to Toyota’s stock due to the company’s alleged failure to tell the public about defects in its cars’ acceleration systems. Hagens Berman has filed a separate and unrelated consumer rights class-action lawsuit against Toyota. You can read about it here.

In the BP case, public pension funds in Ohio and New York allege they suffered a combined $200 million in investment losses related to BP’s stock because the company allegedly misled investors about the safety of its drilling operations in the wake of the disastrous oil spill in the Gulf of Mexico last summer.

The Supreme Court’s Morrison decision could effectively gut investment fraud attorneys’ ability to recover damages on behalf of the respective classes in both cases. It’s bad news for all investors – large and small.

The country is just now recovering from a period of economic turmoil not seen since the Great Depression. Much of that turmoil was caused by big companies that put corporate profits first and investor rights a distant second.

Investors’ confidence in Wall Street has been decimated. Now is not the time to give multinational corporations diplomatic immunity and limit the ability of investors to hold Big Business accountable.

The world is flat. And getting flatter. It’s what makes the world go round. So to speak.